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June 02, 2023

BSP to end zero spread on peso rediscounting loans in June

The Bangko Sentral ng Pilipinas (BSP) has granted a final extension of the zero spread on its peso rediscount loans anew until the end of June this year as part of the gradual withdrawal of extraordinary liquidity measures deployed during the height of the COVID-19 pandemic.

BSP Governor Benjamin Diokno said the central bank’s Monetary Board approved the three-month extension of the temporary measure in the rediscounting facilities that lapsed last month.

“As the BSP begins to observe indications of a durable economic recovery, we continue to carefully develop our plans for the eventual withdrawal of the extraordinary liquidity measures we deployed in response to the pandemic,” Diokno said.

During the height of the global health crisis, the central bank approved the temporary reduction in the spread on peso rediscounting loans usually used for capital asset expenditures, permanent working capital, among others relative to the central bank’s overnight lending rate to zero.

Rediscounting is a BSP credit facility extended to qualified banks with active rediscounting lines to meet their temporary liquidity needs by refinancing the loans they extend to their clients using the eligible papers of its end-user borrowers.

“The BSP observed that banks have more than adequate liquidity to meet their requirements given that there have been no availments of the rediscounting facility as of March 25 this year,” Diokno said.

However, the reduction of the term spread on rediscounting loans under the Exporters’ Dollar and Yen rediscount facility (EDYRF) to the 90-day London interbank offered rate plus or other applicable benchmark, plus risk premium was no longer extended after lapsing last March 31.

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